Worried homebuyer
First home buyers increase market share by 50.4%. Photo – Canva.
  • Housing affordability improved by 0.7% over 2020, but worsened towards the end
  • Low interest rates fed into larger loans and higher prices, with first home buyers busy
  • NSW is the least affordable state, where 44.6% of income is required for mortgages

With the property boom continuing unabated, it is no surprise that housing affordability (expressed as the percentage of one’s income is taken up on mortgage repayments or rent) was already worsening towards the end of 2020.

Overall, housing affordability improved by 0.7% during the entire 2020 year, but fell away in the December quarter, according to the latest Housing Affordability Report (HAR) from the Real Estate Institute of Australia (REIA).

Low interest rates fed into larger loans and higher prices.

“The market defied the doomsday predictions with median house prices rising across the country in 2020 with demand-driven mostly from first home buyers,” said REIA President Adrian Kelly.

“Australian first home buyers increased their market share by 50.4% over 2020, motivated by low interest rates and the range of first-home buyer incentives on offer.

“Seeing this trend in conversion to homeownership is particularly great news given the challenges many tenants and investors faced over the pandemic however surging house prices could see housing affordability obliterated unless measures to improve supply are implemented.

“This particularly applies to regional parts of Australia.”

Adrian Kelly
Adrian Kelly, REIA President. Photo – REIA.

The ability of people to pay their home loans also improved by 0.9 percentage points to 34.8%.

“The measure for housing affordability – the proportion of income required to meet loan repayments – ranged from an increase of 0.1 percentage points in Victoria to an increase of 2.3 percentage points in New South Wales,” said Mr Kelly.

“New South Wales is the least affordable state, where the proportion of income required to meet loan repayments is 44.6%.

“The Northern Territory is the most affordable with the proportion of income required to meet loan repayments 21.9%. It is now more affordable to buy than rent in the Northern Territory,” he said.

Rental affordability suffered, however, with the proportion of income required to make rental payments up to 24%.

Tasmania is the least affordable state to rent (29.5% of income), in respect of income, and Western Australia was the most affordable (17.8%).

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